Malaysia c. bank holds rates steady, sees steady growth path

Reuters Staff

3 Min Read

KUALA LUMPUR, Sept 18 (Reuters) - Malaysia’s central bank kept its key interest rate unchanged at 3.25 percent on Thursday, holding off from a second tightening in less than three months after recent signs of a slowdown in exports and credit growth.

“The prospects are for the Malaysian economy to remain on a steady growth path” Bank Negara’s monetary policy committee said in a statement.

Malaysia’s economic growth has been underpinned by strong exports and robust consumer spending in the first half, with second-quarter gross domestic product growing a healthy 6.4 percent from a year earlier.

But since then credit growth has slowed, with a rise of 8.6 percent in July compared with 9.3 percent in June, and economists expect the pace of loans to moderate further.

Malaysia’s exports in July posted their weakest performance in more than a year, well below expectations, as demand from China and Japan for key goods slumped, while imports shrank on lower domestic consumption.

Exports rose just 0.6 percent from a year earlier, the weakest since June 2013, while imports fell 0.7 percent, the first decline since May last year.

Industrial output nearly stalled in July, largely due to weakness in the mining sector.

“Inflation has continued to stabilise as the effects of the price adjustments for utilities and energy have continued to diminish,” the central bank said in its statement, adding that inflation was seen remaining stable for the rest of 2014.

The central bank raised Malaysia’s policy rate by 0.25 percent in July, its first hike in three years, to address concerns over fast-rising household debt that stood at 86.6 percent of GDP, among the highest in Asia. (Reporting by Trinna Leong; Editing by Stuart Grudgings)